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5 bullish-gold-indicators2013

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What Wayne Gretzky Has In Common With ABull Market For Gold In 2013Experts say he was the greatest hockey player ever. Fortunately, there’s a way to look into the future and protect the wealth you’ve worked all your life to obtainA magician on the ice, the “Great Gretzky” had a knack at and keep it away from financial predators who standbeing at the right place at the right time. Not the fastest between you and your family’s future. For that you’ll needskater, nor the most athletic player on the ice, Wayne two things:Gretzky’s strategy was simple, direct and effective. • An understanding of how to invest in volatileGretzky’s secret? “I skate to where the puck is going to financial marketsbe, not where it has been, and not where it is now.” • A single, often- overlooked commodity investmentImagine that. Heading to where you need to be so you’re that can protect your accumulated wealth fromin prime position to leverage opportunity. How you can financial & economic disasters . . . and make youposition your assets to ensure that you’re ahead of the wealthier in the process.puck when the financial game gets tricky.Why not think about the future of your assets? After all,considering your financial future isn’t a luxury – it’s anecessity. Back to the Great OneWe know Gretzky’s secret weapon was his ability to • Exposure to a high-quality, growth-oriented investmentvisualize where the puck was going to be before it got • A dependable, steady source of incomethere. And the tools in his arsenal that allowed him to • Protection against economic volatilityout-maneuver other players were his skates and his • A relatively low tax rate investmentsmarts that he utilized to get where he was going. • Leverage in gaining quick cash liquidityIt’s the same idea in the asset investment game. You In other words, a simple stock investment strategy that isneed a vision of where your assets need to be positioned so easy, so powerful, and so effective that, once you havein order to solidify and ensure your financial future. And secured it, there is nobody who can ever take away theyou need a tool to help you get those assets where they wealth you’ve earned and want to save and pass along toneed to be. Only instead of using skates, you’ll be using your family.the aforementioned commodity strategy to protectand build upon your wealth . . . a solid, dependable,perfectly adaptable strategy that provides true financialsecurity; the kind where you have . . . 2

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The Most Effective Asset Protection DeviceEver DesignedIn short, if you have more money now than you’re willing But no matter what the economy is doing, gold is ato lose-or enough to make it worth someone’s effort to relatively safe and growth-oriented investment. At anytake-you need to consider getting yourself some serious given time, gold can be a “safe haven” investment, aasset protection. hedge against inflation, a diversification play, and a hedge against a collapse of a country – or even a global –And that’s where gold can help. economy.Gold is flying off the shelves these days, trading at It also has five qualities that make it the best$1,600 in mid-2012. Gold has skirted toward $1,800 investment in the world:per ounce, and the Wall Street investment firm GoldmanSachs has said gold should rise to $1,860 before the • It’s rare - Gold represents roughly five parts per billionyear is out. of the earth’s crust. Consequently, gold is both difficult and expensive to dig out of the ground.Goldman is hardly alone. Thomson Reuters GFMS saysthat gold prices could rise above $2,000 by 2013, with • It’s virtually indestructible - Gold won’t ever diminishan average price point for the year above $1,730 per in quality or decay structurally.ounce. • It’s limited in quantity - All the gold in the world couldThen there’s the investment bank Morgan Stanley, which fit in the confines of a football field, and would only risesays gold could crest $2,175 an ounce in 2013. five feet off the ground.Despite what some Wall Street prognosticators say, it’snot too late to get into gold -- as Goldman Sachs, Morgan • It’s malleable - Gold can easily be shaped in variousStanley and Thomson Reuters both say, there’s plenty of shapes and sizes, thus increasing its value in theupside for gold going into 2013. consumer marketplace. • It’s hard to find - Gold is mined incrementally – its output rarely exceeds 2% annually. Gold Price Estimates: Morgan Stanley, 2012 to 2013 Gold Price Estimates: Morgan Stanley, 2012 to 2013 2012 average year price: $1,825.00 / ounce 2013 average year price: $2,175.00 / ounce From Morgan Stanley research report on gold prices going forward: Investor demand for gold as a safe haven is likely to keep gold prices elevated. A low interest rate environment, unconventional monetary policies in the U.S. and Europe, and political tensions in the Middle East will also boost prices. Source: Morgan Stanley 3

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Heavy Metal: Gold Investment TipsA good rule of thumb for investing in gold is to gauge stock market volatility over the next 30-day period.economic volatility. One way to do that is to measure the“VIX” Index. By and large, when the VIX is climbing upward, so too will gold prices. There’s even a specific gold volatility indexVIX is shorthand for the Chicago Board Options (the “GVZ”) and it’s also trending upwards significantly inExchange Market Volatility Index, and it measures the 2012.implied volatility of S&P 500 index options. Tradershave long nicknamed the VIX as the fear index, as itrepresents a key stock market the market estimate ofWhy Gold Will Rise in 2013Gold has had a bumpy ride so far in 2012, but the outlook Consequently, more and more investors are starting tofor 2013, as exemplified by the myriad bullish investment view gold as a fairly reliable investment. With demandoutlooks from the Goldman Sachs and the Morgan still high (gold purchases in India, for example, have risenStanley’s of the world, is highly favorable. On August 25% in the past 10 years, and China’s gold market is23, 2011, the spot price of gold reached $1,910.00 an showing similar growth), the Word Gold Council expectsounce, mainly on the continued slide of the U.S. dollar and that number to rise significantly by 2020.from a run-up in inflation. That’s more than double theprice of $670 an ounce the commodities market saw just On Wall Street, like in most speculative venues, timing isfive years ago (in May 2006). everything. Investors historically view gold as an excellent hedge against inflation, and as a strong currency playBut gold prices aren’t really all that volatile, at least against a struggling dollar. With inflation rising and thehistorically speaking. In the run-up to $1,500-an-ounce, dollar falling, “gold-diggers” are increasingly turning togold prices over the past six months actually only have a gold as a hedge – and a profitable one, at that.standard deviation of 0.7. That’s significantly more stablethan the 10.3 standard deviation the gold market saw in But there’s much more to the bull market in gold coming1979, when gold prices rose 180%. down the pike, and we have no problem sharing five of our favorite “gold bull indicators” for 2013:Bullish Indicator #1: In Volatile Markets, GoldCovers a Whole Lot of GroundGold investors know something that non-gold investors don’t now – gold is one of the most versatile investments inhistory, especially in volatile economies like the one we’re experiencing right now. 4

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Think of the various reasons that regular consumers and Now think about the chaotic global economy, whereWall Street fat cats invest in gold: Europe is teetering on the brink of recession, and once-stable economies like the U.S., China, and India• As a hedge against inflation. have all seen significant slowdowns in key sectors like• As a hedge against a declining dollar. manufacturing and housing.• As a safe haven in times of geopolitical and financial market instability. Wouldn’t you want an investment that protects you• As a commodity, based on gold’s supply and demand in volatile economies, and in the volatile markets that fundamentals. accompany such economies? That’s what gold can do for• As a store of value. you in 2013.• As a portfolio diversifier.Bullish Indicator #2:As Inflation Rises, So Too Will GoldGold is renowned as a hedge against inflation. And But myriad factors that contribute to higher inflation areinflation is exactly what’s beginning to churn in global now in play, including:economies, and that’s good news for gold investors in • Robust stimulative monetary policy2013. • Trillion-dollar bailouts for banks and corporations • A weakening dollarHistory tells us that gold rises as inflation rises. Since • A huge U.S. trade deficit1945 – the culmination of World War II – the five years • A huge U.S. public debt problemin which U.S. inflation peaked were 1946, 1974, 1975,1979, and 1980. In that timespan, the average return Another point on gold and its relationship with inflation.from stocks, as measured by the Dow Jones Industrial Few investors want to earn negative interest. If you payIndex, was -12.33%; the average real return on gold was an entity to hold your money -- as opposed to earning130.4%. interest – investing in gold is significantly more appealing. With inflation hovering at 2%, the yield for U.S. TreasuriesThe school of thought that global economies are heading earning under 2% in mid-2012, and bank savings ratesin that same direction is widening. Inflation has nominally earning far less than that, negative real interest rates (i.e.remained below 3% for 2012, after nine months of plus- investment returns after inflation) are pushing investors3% activity in 2011. toward assets with real value – namely gold. All of the above contribute to higher inflation, and ultimately, to higher gold prices.Bullish Indicator #3:Gold Protects Against a Falling DollarAs noted above, the U.S. dollar is in decline in 2012, against both the Euro and the Japanese yen. How does that impactgold prices? Quite significantly, actually. Gold is traded against U.S dollars, and as a result, any fall in the U.S. currencytriggers a rise in the price of gold.Since the U.S. dollar is the world’s reserve currency, its trajectory (or decline) also impacts the direction of gold prices. 5

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In 2012, the steep decline of the dollar has elevated the last year, according to the World Gold Council. For theprice in the gold price, and that’s a trend that should first time since the 1980s, central banks have been netcontinue. Over the long haul currencies will be squaring buyers of gold for three years in a row. Economists sayoff against each other for devaluation. Sooner or later, that Central bank demand could grow even more if Chinaglobal currencies weaken, and investors will increasingly decides to replace dollar-denominated debt with gold asturn to gold to protect their financial portfolios. a hedge against a dollar that gets torpedoed by U.S. debt and economic problems.In addition, global central banks, especially in SouthKorea, Thailand, Russia and Mexico are buying gold That scenario would push gold prices even higher - aagain, adding to demand. By the middle of July, central scenario more and more economists view as realistic inbanks had bought more gold this year than in all of 2013.Bullish Indicator #4:If Europe Falls, Gold is the Place To BeIssue #4 is the massive amount of debt accumulated by conditions across the continent, and that inflation shouldEurozone countries, and the concurrent effort by Euro really gain momentum in 2013.leaders to deleverage and reduce that debt burden.Euro countries have taken a page out of the Keynesian Europe is also legitimately in crisis, and gold has aeconomic book, and are trying to deleverage debt by well-earned reputation as the “crisis commodity” as itadding more of it, in hopes of stimulating various regional has historically bested other investment vehicles duringeconomies (especially those of Greece, Spain, Portugal periods of political or economic tension. Ultimately, theand Italy). Unfortunately for consumers in those markets, same issues that negatively impact other investmentsthat deleveraging is already beginning to spur inflationary traditionally trigger higher gold prices. That’s why gold has a great reputation as a solid portfolio option.Bullish Indicator #5:Demand For Gold Will Be Higher In 2013Demand for gold is outpacing supply and that trend accumulate bullion. Make no mistake, China will only beshould accelerate in 2013, especially as gold production buying more gold in the future as it attempts to divestweakens. That’s what is happening right now. In fact, itself of some of its estimated $2 trillion in U.S. dollarglobal gold production has not surpassed its record output reserves.in 2000, leading some experts in the mining industry towonder whether the world has hit “peak gold.” As noted above, demand for gold also is surging from central banks, which have become net buyers since 2009That limited supply has increased global demand, after several years of selling an average 400 tons perespecially in two major global markets. Both China and year. In fact, central banks last year added the most goldIndia have been purchasing unprecedented quantities to their reserves since 1964. The official sector looks toof gold, not only at the central-bank level but also be net buyer of gold for years to come.by encouraging their increasingly well-off citizens to 6

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In addition, China is encouraging its citizens to buy gold – with the world’s largest population, and one of the fastestgrowing economies China has made it legal for their citizens to buy gold and silver, and are actively encouraging them toinvest in these precious metals.Then there’s India, which has been the largest buyer of gold in the past few years, a trend that is expected to continueas government buyers load up on gold for investments, and as consumers buy more jewelry, befitting their emergingmiddle class status. India already consumes most of the global gold annual mine output, leaving limited quantity for evercompeting and ever larger demand.Building Your Gold PyramidThink of investing in gold as a four-tiered pyramid, with the safest tier as your foundation (on the bottom) and then the risk(and the reward potential) rises as you climb upward on the pyramid (see chart below). 7

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Bonus Section: Consider Gold ETFsThe primary benefit of buying gold ETFs over direct • Gold pricing is more transparent with ETFs – Goldpurchases of gold is simplicity. Owning gold directly brings ETFs are sold on the open financial markets, thus ensur-with it some serious responsibilities that go with commod- ing that the price of ETFs are always quoted on the stockity ownership. exchange and that there is always a bid/ask price avail- able during market hours enabling investors to buy/sell atFor example, unless you buy gold directly from a bank, market prices. Plus, with physical gold, sellers (like banksthere’s no guarantee of its purity on the open market. You and jewelry store owners) often add a premium of up towon’t earn any interest from owning physical gold, and 15% on gold sales.you’ll have to pay for a secure storage facility, like a bankvault, to hold your gold. • No storage – You don’t have to worry about storing gold with an ETF. The gold is physically held by the fundBesides the simplicity factor, playing gold via an ETF offers provider, safely and securely.benefits: • The “purity” issue: Exchange traded funds, like com-• Increased liquidity: Gold ETF’s offer some of best mon stocks and mutual funds, are regulated by the U.S.liquidity on Wall Street. Besides being publicly traded every Securities and Exchange Commission. According today, gold ETFs are traded on the world’s major exchanges, regulatory statutes, ETFs must include assets with a purityincluding New York, Sydney and Tokyo. factor of 99.5% fineness and above. That guarantees investors will own a reliable source of gold.• Smaller purchase amounts – Gold investors canleverage ETFs in myriad ways, but one of the most popularways is to buy gold in small amounts – even as low as halfa gram, depending on the particular ETF.Conclusion: A World In TurmoilSets the Stage For GoldIt’s no secret that moving to where the profits are is a page right out of the Wayne Gretzky handbook, and that’s exactlywhere the financial markets are moving right now. With the world economy in turmoil, and no quick end in sight to thetoxic issues weakening global economic strength, the stage is set for a bull run in gold for 2013. Consequently, investorsmay want to stop looking at adding gold to their portfolio as a luxury. These days, it could be a necessity. 8